California Organized Investment Network (COIN) Is a Collaborative Effort Between the California Department of Insurance, the Insurance Industry, Community Affordable Housing and Economic Development Organizations, and Community Advocates.

The Investigation Division investigates suspected fraud committed by insurance agents, brokers, public adjusters, bail agents, insurance companies and other individuals and entities transacting the business of insurance who perpetrate fraud against consumers.

Bulletin 94-7

Basis For Interest Rate Calculations
Reference Interest Rate R
Features in the determination of the value of R include:

The source: Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Services, Inc.

The averaging period:

Averaging over a period of twelve months. (12)

The lesser of the average over a period of thirty-six months and the average over a period of twelve months. (12/36)

The end of the averaging period is June 30 of the calendar year:

of issue or purchase. (YI)

next preceding the year of issue. (YI-1)

of the change in fund. (YF)

Formula For Determining The Maximum Valuation Interest Rate, I

There are two formulae used to calculate:

(A) I = .03+W(R1-.03)+(W/2)(R2 -.09)

(B) I = .03+W(R-.03)

Where:

R1 is the lesser of R and .09

R2 is the greater of R and .09

R is the reference interest rate

W is the weighting factor

Life Insurance (Formula A) Annuities

Calendar
Year

R

R

R

Calendar
Year

Formula A
R1

R2

Formula B
R1

R2

81

9.89

9.00

9.89

81

11.57

9.00

11.57

13.71

82

11.57

9.00

11.57

82

13.64

9.00

13.64

15.70

83

13.64

9.00

13.64

83

13.39

9.00

13.39

13.39

84

13.39

9.00

13.39

84

13.22

9.00

13.22

13.22

85

13.22

9.00

13.22

85

13.01

9.00

13.01

13.01

86

13.01

9.00

13.01

86

10.75

9.00

10.75

10.75

87

10.75

9.00

10.75

87

9.40

9.00

9.40

9.40

88

9.40

9.00

9.40

88

10.15

9.00

10.15

10.32

89

10.15

9.00

10.15

89

9.93

9.00

9.93

10.09

90

9.93

9.00

9.93

90

9.52

9.00

9.52

9.52

91

9.52

9.00

9.52

91

9.63

9.00

9.63

9.63

92

9.63

9.00

9.63

92

8.88

8.88

9.00

8.88

93

8.88

8.88

9.00

93

8.13

8.13

9.00

8.13

94

8.13

8.13

9.00

94

7.52

7.52

9.00

7.52

95

7.52

7.52

9.00

STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE

425 South Market Street
Sixth Floor
San Francisco, California 94105

Bulletin No. 94-7
Date: September 1, 1994
To: All Admitted Life and Disability Insurers and Other Interested PersonsSUBJECT: Rates of Interest for Minimum Reserves and Nonforfeiture Values - 1995 Life Insurance; 1994 Annuities

This replaces Bulletin No. 93-5.

Attached is Table 1 showing the rates of interest to be used fordetermining minimum reserves and nonforfeiture values accordingto Sections 10163.2(i) and 10489.4 of the California Insurance Code applicable to life insurance policies issued in 1995 and annuity contracts issued or undergoing a change in fund in 1994. Also shown in Table 1 are the interest rates applicable to life insurance policies issued in 1982 through 1995 and to annuity contracts issued or funded in 1981 through 1994. The Moody's Corporate Bond Yield Averages used in these calculations are those for the period ending June 30 for each calendar year shown. These were:

Average over period ending June 30

Calendar
Year

Of a 12-Month
Period

Of a 36-Month
Period

1979

9.49%

8.92%

1980

11.51

9.89

1981

13.71

11.57

1982

15.70

13.64

1983

13.39

14.26

1984

13.22

14.10

1985

13.01

13.21

1986

10.75

12.33

1987

9.40

11.05

1988

10.32

10.15

1989

10.09

9.93

1990

9.52

9.97

1991

9.63

9.74

1992

8.88

9.34

1993

8.13

8.88

1994

7.52

8.18

Appendix A is a brief background outline of the basis for the calculation of the interest rates shown in Table 1.

John Garamendi
Insurance Commissioner

TABLE 1

STATUTORY CALENDAR YEAR INTEREST RATES BASED ON NAIC STANDARD VALUATION AND NONFORFEITURE LAWS

B. Single premium immediate annuities, and annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options.